THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

ANDERSON COOPER, CNN ANCHOR: Good evening.

Tonight, the Bush team strikes back, slamming Tom Ridge after his bombshell allegation that key Cabinet members tried to play presidential politics with the terror alert. Ridge, the former secretary of homeland security, says in a new book he felt pressured by Donald Rumsfeld and John Ashcroft and others to raise the nation's terror alert level four days before the 2004 election, without, he believes, any legitimate justification.

He writes in his book -- quote -- "There was absolutely no support for that position within our department, none. I wondered, is this about security or politics?" He adds, "I consider that episode to be not only a dramatic moment in Washington's history, but another illustration of the intersection of politics, fear, credibility and security."

The reaction of some Bush loyalists today was swift, former Chief of Staff Andy Card telling Politico -- quote -- "We went over backwards repeatedly, and with great discipline, to make sure politics did not influence any national security and homeland security decisions."

Mark Corallo, John Ashcroft's spokesman at the Justice Department, was more blunt. Corallo told "The New York Times" the incident -- quote -- "did not happen." He went on to say, "Now would be a good time for Mr. Ridge to use his emergency duct tape."

Joining us now, Frances Townsend, former homeland security adviser to President Bush, now a CNN national security adviser, and CNN political contributor and Democratic strategist Paul Begala.

Frances, do you believe that Tom Ridge is simply trying to sell books here?

I will tell you, you know, Anderson, it is pretty interesting to me. Secretary Napolitano, the current secretary of DHS, has asked a bipartisan group to consider suggestions to improve the terror alert system. And, so, one of the -- I'm co-chairing that group.

We asked for Secretary Ridge's -- to express his -- see the group, talk to us and express his concerns or suggestions. That was less than three weeks ago. And he never mentioned concern about politicization and politics being played.

COOPER: But let me say, in 2005, he did say publicly -- and it was quoted in "USA Today" at the time, though people really didn't pay attention -- he said -- and I quote -- "More often than not, we were the least inclined to raise it." He's talking about Homeland Security and the threat level.

"Sometimes, we disagreed with intelligence assessments. Sometimes, we thought, even if the intelligence was good, you don't necessarily put the country on alert. There were times when people were really aggressive about raising it, and we said, for that?"

So, clearly, he was expressing divisions. He didn't talk about politics in particular at the time, though.

TOWNSEND: Right. And that -- a lot of that had to do with, Anderson, you know, there are real costs, resource wise, credibility wise, to raising it. And, so, you don't want to do it unnecessarily.

That has got nothing to do with politics. It is just very expensive, the burden on state and local law enforcement, for example. And you can't sustain it for a very long period of time.

COOPER: Paul...

TOWNSEND: So, Tom had legitimate reasons when he was concerned about that. But it had nothing to do with politics.

Anderson, I chaired this meeting. And I will tell you that John Ashcroft and Don Rumsfeld had concerns. They -- but they were based on the intelligence, not the politics, of what was going on at the time.

COOPER: Paul, if he really believed politics was at play, didn't he have a duty to say so at the time or when he resigned?

PAUL BEGALA, CNN POLITICAL ANALYST: Yes. Yes, frankly, he did.

But I think you just pointed out we do have contemporaneous confirmation. I mean, one of the questions that critics of Secretary Ridge had yesterday when this came out is, why he is only doing it -- Fran just did that, impugning his motives, saying he is only doing this to sell books.

Well, at least according to published accounts, the guy has been very successful in business. He is on the board of directors of a bunch of big companies. He is making plenty of money, from published accounts.

But we now have contemporaneous -- Within three months of resigning, he did, in fact, say, as you just pointed out, as a Washington forum that "USA Today" covered that there was enormous pressure to raise these levels and there was a pattern of raising those levels. They -- they raised the threat level right after the Democratic Convention based on three-year-old information. They raised the -- the specter, not the threat level, the specter of a terrorist attack just a few days before the 2006 elections. Remember, they said the NFL football stadiums were -- were all going to be targeted. And CNN, this network, reported that that was not actually a credible threat or a credible report at all.

So, there's -- there is a long history here. And I guess I would be real careful about impugning Secretary Ridge's motives here.

COOPER: I mean, Fran, you are basically saying he is lying.

TOWNSEND: Well, look, I don't understand, Anderson, if he felt that way, why he didn't say it at the time, why he didn't speak out publicly.

And, by the way, literally, three weeks ago, when he had a group, a bipartisan group in front of him of very eminent state and local officials, prior elected officials, why didn't he say that he has got a concern about the credibility of the system because it is subject or vulnerable to the playing of politics?

(CROSSTALK)

COOPER: Paul, what do you say of that?

BEGALA: It could well be because the people who he accused politicizing it are no longer there, that we threw the bums out. And so I guess he is probably a lot less worried about this kind -- I don't -- can't read his mind.

But it is certainly inarguably true that the people he accuses in -- in his book, Secretary Rumsfeld, Attorney General Ashcroft, are no longer in office. And, so, I suspect it's maybe a little late...

(CROSSTALK)

COOPER: Frances, you have repeatedly said that, you know, you were at this meeting. You were chairing this meeting, in fact, and no one talked about politics. John Ashcroft didn't talk about it. Donald Rumsfeld didn't talk about it.

But if somebody really was being motivated by political concerns, they wouldn't actually talk about it. I mean, no one would be that stupid, right?

TOWNSEND: Well, perhaps that's right.

But I will tell you, here is the other thing. It's very interesting. When you read the account, Tom Ridge's account of that meeting, it is very Tom carrying the banner. And, in fact, he uses language about pulling them back from the brink.

Well, Tom knew going into that meeting that I was chairing that I agreed with him. And he wasn't the only one who spoke up. And, in fact, the most eloquent arguments to be made in that for not raising the terror alert level were made by Secretary of State Colin Powell and by FBI Director Bob Mueller, who was taking on his boss, John Ashcroft, in an interagency meeting with other Cabinet officials.

And, so, there was strong support in that meeting, not just by Tom Ridge, but by a group of us, not to raise it. And, ultimately, that -- that was the view that prevailed.

COOPER: But why would it be, for Robert Mueller, taking on John Ashcroft, even though I know John Ashcroft is his boss? But if -- if all this is not about politics, and all this is purely just looking at intelligence, why isn't Robert Mueller just expressing his differing view of the intelligence OK?

TOWNSEND: No, no, it is OK. And, in fact, Anderson, I would argue this is exactly the sort of debate you want to encourage and you want to provide a forum to make sure that the president of the United States gets the best possible advice.

I think that that debate led to the best advice to the president, who agreed and accepted it, in not raising the terror alert level. I mean, I think what we walk away from this seeing is, politics absolutely played no role in that decision.

COOPER: Paul Begala, do you think this is the kind of accusation gets made and just kind of is cable news fodder for a while and disappears, or do you think this goes further? These are serious, serious allegations.

BEGALA: They are. And they come during the August recess. Why do I point that out? Because, if this is going to go further, it's going to be because Congress decides to investigate.

And the two people to watch are Bennie Thompson, a Democratic congressman from Mississippi, who is the chairman of the House Homeland Security Committee. He put out a very strong statement today. He said the revelation in Ridge's book is confirmation of what we suspected. The Bush White House sought to politicize homeland security and exploit Americans' fears about future attacks.

That is a pretty strong statement. We have heard nothing yet from the Senate chairman of the Homeland Committee -- Homeland Security Committee. And that's Joe Lieberman. My guess is -- I don't speak for Lieberman, believe me. And I'm not a big fan of his. But it will be interesting to how seriously Senator Lieberman takes this, because he's the guy who wrote the bill who created the Department of Homeland Security.

(CROSSTALK)

BEGALA: So, I think those two guys are going to be really important to watch to see if they want to take a look at this.

COOPER: Frances...

(CROSSTALK)

TOWNSEND: Anderson, two points. One, if every time Cabinet secretaries have a debate in a White House meeting, we are going to open up an investigation, this city is going to be closed for business, whether it is a Democrat or Republican administration.

Second, I have to tell you, I find it a little unseemly Tom Ridge is going to release this book on the -- on the eve of the eighth anniversary and take advantage of a time that is really still a raw moment in our history and a very vulnerable time, particularly for the victims' families of 9/11. I find it unseemly, frankly.

BEGALA: George Bush staged his political convention in New York City to coincide with 9/11.

His first ad had pictures -- I'm sorry to get so upset. But it bothers me. I lost friends of 9/11. His first advertisement for his reelection had pictures of bodies being carried away from ground zero.

It is really obvious, I think, to -- to folks that George W. Bush did everything he could to politicize national security and the war on terror.

TOWNSEND: Paul, I lost -- I lost a friend as well on 9/11. And I understand your outrage at that. I don't think it makes it right for Tom Ridge to use it to sell books.

COOPER: And you think that is what he is doing? You say he's using 9/11 to sell books?

TOWNSEND: I don't think it is an accident, Anderson, that the book is coming out on the eve of the eighth anniversary.

BEGALA: What -- what then does it say about President Bush and his judgment?

He asked us to trust Secretary Ridge with the lives of all of us, 300 million lives. Now, first, he was going to ask Bernie Kerik, who has had, I think, a few little run-ins with the law. And then he -- he -- he settled upon Tom Ridge.

I think it is really, frankly, not in the Republicans' interest to be trashing a guy who -- who earned the Bronze Star for Valor in Vietnam, who was a...

COOPER: We have got to leave it there.

BEGALA: ... a well-regarded governor, and a -- and a -- and the person that George W. Bush said we should trust with our lives.

COOPER: Let us...

TOWNSEND: Look, I...

COOPER: I -- we have got to leave it there. I'm sorry. We are simply out of time. I appreciate both of you being on tonight on this Friday night. Let us know what you think at home. Who do you believe? Join us at AC360.com. The live chat is happening right now.

Coming up next on 360: breaking news about the economy. And it is a stunner, another big hit for President Obama. New numbers released tonight show a huge spike in the deficit and it is much worse than anyone predicted -- details on this breaking story ahead.

Also, she is fast, but is she a female? The gender questions swirling around this gold medal runner. We will also talk to a doctor about why it is tougher than you think to determine someone's sex.

That is coming up.

(COMMERCIAL BREAK)

COOPER: Breaking news to tell you a , bad news to tell you about the economy, a new and, frankly, eye-popping picture of just how much debt is piling up.

Hours after Fed Chairman Ben Bernanke pleased Wall Street by saying a recovery was near, a White House official leaked word that they now expect another $2 trillion in federal budget deficits over the next 10 years. That's on top of the $7 trillion already projected, red ink for the budget, red meat for the president's critics.

Tom Foreman has the breaking news.

(BEGIN VIDEOTAPE)

UNIDENTIFIED FEMALE: If this health care gets passed -- and you know this president...

TOM FOREMAN, CNN CORRESPONDENT (voice-over): The new deficit news can only throw more gasoline into the firestorm over health care reform. The president's signature issue is exhibit A for those who say he is spending recklessness. And a new poll now shows more disapproval than support for how he's handling the issue.

He blames the opposition.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I would love to have more Republicans engaged and involved in this process. I think, early on, a decision was made by the Republican leadership that said, look, let's not give them a victory.

(CHEERING AND APPLAUSE) ` FOREMAN: But independents voters, who were so hot for Mr. Obama's election, have also grown decidedly cooler, many because of the ballooning deficit and what some see as a massive spending spree.

(SHOUTING)

FOREMAN (on camera): Look at this. The Northeast is the only part of the country where health care reform had broad support when we measured it recently. And this is a Democratic stronghold. Out here in the West, it has only 50 percent support. And the rest of the country is against it, even though some of these states contain large percentages of uninsured families.

(SHOUTING)

FOREMAN (voice-over): The apparent contradiction is being driven by age. Many of those states have lots of elderly people.

Craig Gordon is with Politico.com.

CRAIG GORDON, WHITE HOUSE EDITOR, POLITICO.COM: They think about it. They talk about it. It is on their mind every day. And they really have not had a very clear explanation from the White House of how the health reform overhaul would affect their lives.

FOREMAN: Even congressional Democrats remain divided. House Speaker Nancy Pelosi says a government-backed public insurance option is a must.

REP. NANCY PELOSI (D-CA), SPEAKER OF THE HOUSE: There is no way I can pass a bill in the House of Representatives without a public option.

FOREMAN: But physically Democrats have been warning for weeks that a deficit bomb could cripple their party in elections next fall. Aware of their anxiety, Majority Leader Steny Hoyer says:

(BEGIN VIDEO CLIP)

REP. STENY HOYER (D-MD), MAJORITY LEADER: I'm for a public option, but I'm also for passing a bill.

(END VIDEO CLIP)

OBAMA: My point is...

FOREMAN: That's because the president's supporters insist health care reform is necessary to ultimately control the deficit.

PETER SINGER, PROFESSOR, PRINCETON UNIVERSITY: There is a saving in -- in providing the basic treatment for everyone.

(SHOUTING)

FOREMAN: But the latest deficit news, one way or another, will almost certainly intensify the fire from right, left, and center.

Tom Foreman, CNN, Washington.

(END VIDEOTAPE)

COOPER: Let's dig deeper now with former George W. Bush speechwriter David Frum -- he's currently with the American Enterprise Institute -- and again Paul Begala. Paul, summer Friday nights, that's when politicians announce bad news.

BEGALA: Right.

COOPER: The fact that the deficit over the next 10 years is going to be $2 trillion bigger than we thought it was yesterday, isn't this is a serious blow to the president and to health care reform?

BEGALA: Yes, frankly. I think, that, for all the Sturm und Drang of August about death panels, it is not death panels that I think Democrats should be worried about, as a political arguments. It is deficits.

Now, I think the president will be able to make the case that he inherited these deficits. He inarguably did. But I think that's going to be an -- an enormous problem for him.

But, if you look at guts of some of these -- I went and looked at the bill that passed through Senator Kennedy's committee, the health committee in the Senate. It's supposed to be one of the more liberal versions of this. It was scored by the Congressional Budget Office at about $600 billion.

Now, that is a lot of money, but that is half of what some of the earlier versions cost. And it's less than half of what just the Bush tax cuts alone cost. So, I think that there is still a way for President Obama to win this argument on the deficit. But he has to engage it if he wants to win it.

COOPER: David, will President Obama just make the argument that -- that any president would be stuck with this kind of debt in a recession, that the deficit will always grow when there is a recession, because you have got fewer tax dollars to work with, and the government is spending money to stimulate the economy?

Do you think people are going to buy that?

DAVID FRUM, FORMER SPEECHWRITER FOR FORMER PRESIDENT GEORGE W. BUSH: This president inherited a deficit, but he didn't inherit this deficit. This deficit, he made.

And he made it with his eyes open. He made it in the first months of his presidency, when he decided to do this enormous stimulus package. Now, that's not to say he should have done nothing about the recession, but the United States has had about the biggest stimulus in the world. Only China -- relative to its economy. Only China did a bigger one. And China of course had the money in the bank. It didn't have to borrow.

Countries that did smaller stimuluses, like Canada, are coming out of the recession faster. In fact, of the world's 10 biggest economies, I think only the United States, Britain, and Italy are still going to be in recession at the end of the year, it's generally projected. So, he -- he sold a big stimulus to the country on the promise it would end the recession faster. It didn't. And now the debt is real and permanent. And that is his legacy to the next phase of his presidency, including his health care reform.

BEGALA: I'm sorry. I'm sorry. The -- the -- the one-year stimulus is not driving the 10-year structural deficit. It is just not.

What is driving it are things like this, a war in Iraq that has -- it's going to cost -- Joe Stiglitz, a Nobel Prize-winning economist, think it's going to cost $1 trillion to $2 trillion. The Bush expansion of entitlements, he added an entitlement for prescription drugs for senior citizens with no way to pay for it. That is already at $800 billion and going to continue to grow.

It is the structural things that Mr. Obama inherited that are driving this thing...

FRUM: Paul, this -- this stimulus...

BEGALA: ... not the one-year stimulus. I mean, come on. I...

FRUM: The stimulus is not a one-year stimulus. It's a three- year stimulus. It costs almost $800 billion.

And it was all borrowed money, so there will be a compounding effect on the debt. Plus, he, in his -- in his first two budgets, in the interim budget, where he paid for the second half of the fiscal 2009 year, and then his 2010 year, he massively ramped up the ongoing level of government expenditure, so, all of which has interest paid on it. And the interest compounds.

So, he inherited some problems. I'm not denying that. But he made new problems for himself on the basis of false predictions about the economy. Now he's proposing...

BEGALA: I'm sorry. I still have -- I still have a balanced budget.

(CROSSTALK)

BEGALA: It is bound in leather and my name is on it in gold. Democrats balanced the budget.

(CROSSTALK)

BEGALA: And Mr. Bush gave us $1.3 trillion in tax cuts, $800 billion in the Medicare -- in a Medicare entitlement.

(CROSSTALK)

FRUM: And Democrats did a lot good things in the 1890s, too.

(CROSSTALK)

COOPER: One at a time. One at a time.

(CROSSTALK)

FRUM: But that's history. That -- let's talk about what this president did now and why this deficit is so big.

BEGALA: Here's what driving...

FRUM: It is the big -- it is big as a result of decisions made over the past few months.

BEGALA: So, eight months of Obama has been bigger than eight years of Bush?

FRUM: You can spend a lot in eight months. And we have.

(CROSSTALK)

BEGALA: Mr. Bush...

(CROSSTALK)

COOPER: Wait. Wait. Let Paul finish his thought, and then...

(CROSSTALK)

COOPER: ... will let David finish.

FRUM: It's not a theoretical point. We can count it.

BEGALA: Mr. Bush gave us three major drivers of the -- the deficit, his tax cuts, which were $1.3 trillion...

FRUM: Which end on -- in 2010.

BEGALA: ... which were $1.3 trillion.

FRUM: Paul, they're over.

BEGALA: And they continue...

COOPER: Wait. Let Paul finish his thoughts, please.

BEGALA: And they continue to compound.

Second, a Medicare prescription entitlement, the only entitlement in American history without a pay-for in it. That's at least $800 billion over 10 years, probably a lot more by the time they count it all up.

And, third, a war in Iraq that he never once paid for, never asked us to pay for. And that's going to be $2 trillion. That's what is driving the deficit.

(CROSSTALK)

COOPER: David -- David, a final thought.

FRUM: The Bush tax cuts expire in 2010, for better or worse. The war in Iraq is winding down.

But these commitments made since January the 20th, they are new, they are big, and they are ongoing. And they -- and, had they worked, they might have made sense. But they are not working. The United States is going to be slowest out, biggest of the recession, with the biggest stimulus package.

COOPER: We are going to have to leave it there.

Paul Begala, David Frum, appreciate the conversation. Thank you.

FRUM: Thank you.

COOPER: A quick program note: We are digging much deeper on health care, devoting our next hour to the subject -- David Gergen, 360 M.D. Dr. Sanjay Gupta and others answering your questions about the various reform plans out terrorist.

It really explains, over the course of this hour, what the debate about -- is about right now, and what are the various proposals are on the table. "Extreme Challenges: Health Care and Your Bottom Line," that's at the top of the next hour.

Next on this program then: a gender test for a top female runner. Her amazing speed and her looks, basically, have many wondering if this young woman is, in fact, a man. Tonight, her family speaks out, and so does a gender specialist who joins us live.

Also tonight, a new Michael Jackson raid -- today, federal agents searching a Beverly Hills pharmacy. It's in the same building as Jackson's dermatologist. The question is, what exactly were they looking for and what did they find? We will tell you next on the program.

(COMMERCIAL BREAK)

COOPER: The first family is on vacation, starting today, and the White House is pleading with reporters and photographers to leave Sasha and Malia Obama alone. We will show you where they are going ahead.

But, first, Gary Tuchman joins us with a 360 news and business bulletin -- Gary.

According to "Newsweek," one detainee was -- quote -- "threatened with a gun and power drill during the course of CIA interrogation." The magazine sources also say the report details a mock execution staged in a room next to a detainee, where a gunshot was fired to make the suspect believe another prisoner had been killed.

Deficit numbers notwithstanding, there is also hopeful news on the economy -- Fed Chief Ben Bernanke saying -- quote -- "Prospects for a return to growth in the near term appear good." He warned, however, that any recovery would be likely be slow, with continued high unemployment.

Meantime, sales of existing homes rose 7.2 percent in July. It was the fourth straight monthly increase and the strongest month since August 2007. That propelled stocks to new yearly highs, the Dow gaining 155 points, the Nasdaq up 31, the S&P posting a gain of 18.

Looking to Afghanistan, President Obama had nothing but praise for this week's presidential election there.

(BEGIN VIDEO CLIP)

OBAMA: We knew that the Taliban would try to derail this election. Yet, even in the face of this brutality, millions of Afghans exercised the right to choose their leaders and determine their own destiny. And, as I watched the election, I was struck by their courage in the face of intimidation and their dignity in the face of disorder.

(END VIDEO CLIP)

TUCHMAN: Deadly disorder. Twenty-six died in election day attacks. Afghan officials say they will announce results on a piecemeal basis starting next Tuesday.

And the government's highly popular cash for clunkers program runs out of gas this weekend. Dealers have until 8:00 Monday night to file their final claims for any deals on clunker trade-ins.

Anderson, it may be time for me to finally trade in that Pinto.

(LAUGHTER)

COOPER: Yes. Yes, definitely. The clock is ticking.

Up next: We have all seen the hero's welcome a Libyan terrorist -- the hero's welcome that a Libyan terrorist is receiving in Tripoli. Now there's new video, the Libyan dictator welcoming the guy with open arms. But it gets worse. Gadhafi's son is now saying the release of this murderer was all part of a trade deal between Britain and Libya -- details and reaction from a man who lost his brother on Flight 103.

Later, the runner who now has to prove she is, in fact, a woman -- race officials have ordered gender testing. But why is it so hard to determine? Some fascinating facts you probably don't know about what separates men from women.

(COMMERCIAL BREAK)

COOPER: Growing outrage tonight at the hero's welcome for the mass murderer you see getting off the plane in Libya. The terrorist who killed 270 people on Pan Am Flight 103 in 1988 was welcomed back with open arms. And there he is welcomed back by the leader of the country, Moammar Gadhafi. New video as well showing the terrorist, al-Megrahi, meeting the Libyan strong man Gadhafi, who many believed ordered the bombing.

What makes these images even more galling, though, is that Gadhafi's son now says the release came about essentially because of trade deals -- the son telling a Libyan TV interviewer -- quote -- "In all commercial contracts for oil and gas with Britain, Megrahi was always on the negotiating table.

He also issued a statement late tonight praising the British government and reaffirming his belief that this convicted bomber did not do it and would one day be proven innocent.

Britain today sharply rejecting claims of a deal. President Obama called the homecoming scene highly objectionable. His spokesman went even further.

(BEGIN VIDEO CLIP)

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: I think the images that we saw in Libya yesterday were outrageous and disgusting. We communicated with the Libyan government. And we continue to watch what they do in the days going forward.

(END VIDEO CLIP)

COOPER: Relatives of the 270 killed are planning to protest here in New York next month, when Colonel Gadhafi visits the U.N.

Joining us again tonight is Brian Flynn, whose brother John Patrick, J.P., was aboard Pan Am 103 and died at the age of 21.

Do you believe that the man who killed your brother was essentially released because of trade deals between Britain and Libya?

BRIAN FLYNN, BROTHER OF PAN AM FLIGHT 103 BOMBING VICTIM: I don't think it is that simple, but I would be naive to think otherwise.

And I think what really just happened is, the United States and Britain just got played again by Moammar Gadhafi. And this has been happening for 30 years.

COOPER: Played how?

FLYNN: Played by the fact that I'm sure Gadhafi's son had assured everyone that, hey, no, we are going to be very quiet. We just want him to die in peace at home. And, of course, that is not at all what happened.

COOPER: It seemed like President Obama, earlier on, before this happened, was indicating, look, we have communicated that we don't want a hero's welcome for this guy. And, then, literally, it seemed like moments later, he was getting a hero's welcome.

FLYNN: Well, we gave up all the leverage. We gave the guy back.

And you have got a situation that they're registering disgust now. But now is not the time to register the disgust. And I can't manage that, if the president of the United States and the prime minister of Britain didn't want this guy released, we couldn't have stopped it.

COOPER: Jeff Toobin last night on the program talking about compassionate release pointed out that what makes these pictures in particular so galling of him being received with open arms, I mean, not just by Gadhafi, which are the pictures we're -- we're -- we're seeing, but of him being welcomed at the airport, is that the people are cheering not for this guy -- because they don't really know this guy.

FLYNN: Right.

COOPER: They're cheering for what he did.

FLYNN: Right. Exactly.

And -- and they are celebrating what he did. And, remember, there has been no remorse. He has never taken responsibility for it.

COOPER: And, in fact, Gadhafi's son reiterated -- just moments ago, reiterated -- that they believe he -- they claim he is innocent, and that will one day be proven.

FLYNN: Yes. And why would you ever send -- and here is the part that has frustrated all of us and has been tragic. Why would you ever send the guy back who did the crime to the guys who ordered him to do it? It is the worst-case scenario.

And it's exactly what we said would happen. And it almost -- it celebrates the crime that killed 270 people.

COOPER: There is no way that he could have brought down this airline by himself.

FLYNN: No, that's exactly right. And in the conviction, it said clearly that he was working for Libyan intelligence. And we tried everything we could to get to other people in the Libyan government, even to get to Gadhafi. And we failed. But we had one guy in prison, and that to us was a lot. It enabled us to sleep a little bit better.

And that was just taken away from us. You have this guy being celebrating for what he did. This was an act of war that was committed against the United States and the United Kingdom. And our response is to say, "Hey, you can have him back now, because he may be sick."

COOPER: You lived almost, I think, half your life without your brother. He died at 21. You were 20. You know, there's a stupid term, closure, which I just don't -- anyone knows there's no such thing as closure. But something like this has got to just make it all the harder to just kind of go through your day.

UNIDENTIFIED MALE: When it's done, if you think about it, it's a wound, right, that got torn open by the fact that my brother's murderer was sent back to the country. And then, today, you've got salt being poured into the wound, just making it worse.

And I have to say that what bothers me the most is it's almost as if the Obama administration and the Brown administration have committed gross negligence. Now they're really upset that this guy is back in Libya. Well, they should have stopped it before that.

COOPER: And they could have?

UNIDENTIFIED MALE: Yes, and what does it say about how we approach terrorism going forward? What is a terrible irony. We've got prisoners in Guantanamo, which I'm against, who haven't been charged with anything. This guy has been convicted of murdering 270 people, and we send him home.

COOPER: Brian, again, I appreciate you being on tonight. Thank you very much.

UNIDENTIFIED MALE: Thank you.

COOPER: Coming up next on the program, a strange story. Is that -- this runner, she, a he. A track superstar, gold-winning champion, now accused of lying about her sex. The latest in this growing controversy, ahead.

And later the murdered swimsuit model. As the search for her ex- husband intensifies, authorities reveal how breast implants helped authorities identify her body. We'll explain that in a moment.

(COMMERCIAL BREAK)

COOPER: Tonight a remarkably fast runner and stunning questions about her gender. Simply put, is the fastest female runner on earth a man? This is the star athlete in question, an 18-year-old champion from South Africa. She just won the gold medal in the world women's 800 meter event in Berlin.

But it's not just her speed that has people talking. It is her sex, her masculine features. Testing is being done, but as you'll see, there is nothing easy or simple about it.

Gary Tuchman has more.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: Caster Semenya is an easy winner.

GARY TUCHMAN, CNN CORRESPONDENT (voice-over): She is fast. She is overwhelming. She wiped out the field in the 800 meters, but is she a she? Her performance, physique and voice have raised questions.

UNIDENTIFIED MALE: With that comes rumors. I heard one that you were born a man. What do you have to say about stuff like that?

CASTER SEMENYA, RUNNER: I have no idea about that. I don't know who said it. I don't know. I don't give a (EXPLETIVE DELETED) about it.

TUCHMAN: Caster Semenya pulled off the huge win at the world championship in Berlin Wednesday. Three weeks ago, the South African received lots of attention after reporting a world best time at the African junior championships. But now the 18-year-old is receiving scrutiny, track's governing body confirming her gender is being investigated.

Pierre Weiss is the general secretary of the International Association of Athletics Federations.

PIERRE WEISS, GENERAL SECRETARY, INTERNATIONAL ASSOCIATION OF ATHLETICS FEDERATIONS: If at the end of this investigation it is proven that the athlete is not a female, we will withdraw her name from the results of the competition to date.

TUCHMAN: Caster Semenya's family is outraged by what's happened. Her father, Jacob, telling a newspaper in Soweto, "She is my little girl. I raised her, and I have never doubted her gender. She is a woman, and I can repeat that a million times."

Gender testing is extremely complicated, but it's happened before in track and field. Indian runner Santhi Soundarajan had her silver medal in the 2006 Asian Games stripped after failing a gender test. She reportedly showed a male chromosome.

Sprinter Eva Klobukowska of Poland won two medals in the 1964 Olympics but failed a gender test three years later and was banned from professional sports.

And then there was Polish-American runner Stella Walsh, who won a gold medal for the Polish Olympic team in 1932. After she died a postmortem showed she had female and male chromosomes, as well as ambiguous genitalia.

It's an unpleasant situation, and the rules for determining gender are not always clear.

WEISS: I am not a doctor. I am a specialist of (UNINTELLIGIBLE).

Tuchman: But the IAAF general secretary says there are experts on the case and, in a matter of days or weeks, we will know whether Caster Semenya, raised as a girl, will be allowed to run as a woman.

Gary Tuchman, CNN, Atlanta.

(END VIDEOTAPE)

COOPER: It is a fascinating story. Her family, of course, never has doubted her gender. But why is the testing of her sex so hard to determine? Dr. Maddie Deutsch is an expert on the subject. A transgender medicine specialist, Dr. Deutsch joins us now from San Francisco.

Thanks for being with us. Why is it so difficult to determine someone's gender in a case like this?

DR. MADDIE DEUTSCH, EXPERT ON GENDER: Well, determining gender is not something that you can just run one test. Gender is -- excuse me, defined by no one thing. Gender is a mixture of genetics and physiology, which is a term for how the body works and the hormones that are present in the body, as well as someone's gender identity, what gender they feel that they -- that they are inside.

COOPER: So just very basically, I mean, there are a lot of people who say, OK, well, I mean, the genitals should be able to be one factor that helps you determine. But you say that's not conclusive.

DEUTSCH: Genitals are one of many factors that are involved in determining someone's gender.

For example, the runner from India that they had cited, Santhi, she has what we believe is androgen insensitivity syndrome. That's basically a fancy word for someone who has male chromosomes, but their testosterone receptors in their body do not work. So they have testosterone, but their body doesn't know that it's there. So they develop as a girl.

COOPER: And I mean, if you have XY chromosomes, I always thought that made you a man. If you have, what, XX, you're a woman. But it's not that simple either?

DEUTSCH: It's not that simple. It's actually much more complicated. The genes and the genitals and the hormones that are in your body and the identity that's in your mind all have to sort of be put into a mix together. And in a lot of cases...

COOPER: Shouldn't race officials have already decided -- put up benchmarks? Because essentially, they are now invading this person's privacy in the most public way possible. I mean, you would think by now race officials would have determined, all right, well, you need -- you know, on the chromosome level you need this. On the -- you know, on the hormone level, you need this. It's amazing to me they're just now kind of saying, "OK, well, let's test and try to figure it out."

DEUTSCH: Well, I agree with you. I think that, if we're going to start invading people's privacies and questioning people's gender just because they happen to be a high performer or because a woman happens to be more masculine than what is typically expected, that we maybe should start testing everyone as routine testing when someone enters competition.

And again, like I said, because there are so many different characteristics that define one's gender, that you can come away from that with a number of people and still not have a clear answer.

COOPER: They basically have to come up with their own bench marks for athletic competition, their own definition of what a male is, what a female is, and then take it from there?

DEUTSCH: They do, but then that can actually get you into a corner, as well, because you will always find someone who does not meet any of your definitions. And I think that that's probably why this process is going to take so long. It's not because these tests are technically difficult or because they're going to take a lot of time.

It's most likely because there are going to be several different experts who become involved from different disciplines, and there will probably have to be a meeting and some kind of a consensus that will have to come to. This is likely to be a test case moving forward, so it's important that they cross all the "T's" and dot the "I's" properly on this -- in this case.

Coming up next, new information in the death of model Jasmine Fiore. Turns out her breast implants led to her identification. And new reasons tonight why her alleged killer, her former husband, a reality show reject, why he might be so tough to catch.

Later, the first family goes on vacation. The White House saying leave Sasha and Malia Obama alone on their holiday. But will a hurricane get in the way? There's more ahead on 360.

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COOPER: Grisly new details in the murder of swimsuit model Jasmine Fiore. Her body found in a suitcase, her fingers, her teeth removed in an apparent attempt to slow the investigation. As if that weren't enough, prosecutors now reveal today that the body was so disfigured authorities were forced to identify Fiore by the serial numbers on her breast implants.

Meantime, a song the young model recorded in 2005 has surfaced online.

(BEGIN VIDEO CLIP)

(MUSIC)

(END VIDEO CLIP)

COOPER: Tonight's "Crime & Punishment" report, new details on the international manhunt for Fiore's alleged killer, ex-husband Ryan Jenkins. Why he's believed to be in Canada.

U.S. Marshals confirmed today the TV reality contest is also a licensed pilot. He could essentially be anywhere. Also confirmed, a $25,000 reward for information leading to Jenkins' capture. Joining us now is James Allen Fox, professor of criminal justice at Northeastern University. Professor, these details about this woman's fingers and teeth being moved, obviously to hamper the investigation, to make identification difficult. What does it say, though, about someone who could actually do that?

JAMES ALLEN FOX, PROFESSOR, NORTHEASTERN UNIVERSITY: I think many murderers can and many murderers do. They take steps, whatever they need to take, to try to evade apprehension.

The attempt here is to make it difficult, of course, to identify the victim, much less the perpetrator. Of course, he didn't plan on the fact that she could be identified by the breast implants, the serial number. In fact, more -- most people wouldn't know that.

COOPER: I mean, if it is true that Ryan Jenkins is the one who committed this grisly murder, I mean, the idea that somebody who had, at one point, loved somebody else could then remove their fingers and their teeth, I mean, it surprises even me.

FOX: Well, many people are capable of doing that. Of course, it may be a crime of passion. And indeed, what we have here, apparently, is strangulation. Hot tempered, not cold blooded.

COOPER: But -- but if it's a crime of passion, the fact that afterward you then take these steps what does that say?

FOX: Well, the passion and the anger and the rage only lasts so long as the victim is alive. Once she's dead, at that stage, it's "how do I get away with murder?"

Sure. Some offenders will then call the cops and say, "Oh, I lost my temper. I did it." But many will figure out a strategy, a scheme for trying to get away with murder.

And, indeed, trying to obfuscate who the victim is, dicing the body up into pieces to try to hide it in a dumpster in a -- in a suitcase is just a means of trying to get away with murder. Obviously, at that point the perpetrator is certainly cool and doing everything he can to try to evade the police.

COOPER: Jenkins was arrested on domestic violence charges in June after he allegedly hit her and then was also convicted of assaulting a former girlfriend back in 2007. Is past violent behavior usually a good indicator of future abuse?

FOX: Usually is. Not always. We find cases of men and women who kill their intimate partner, and there's been no history of abuse. But typically, there can be an escalation of violence. Someone who, indeed, is very much trying to use violence to exert control.

And in the end, a murder like this can be an act of control. Someone deciding who, how and by what means and when the relationship will end. Oftentimes, it's a case of, if I can can't have you no one can, and who are you to decide that this relationship is over? I'm going to be the one to decide it, and I'm going to be the one to decide how.

Still ahead, the Obamas' summer getaway. As the first family readies for a week at the beach, the White House begs the press to give daughters Sasha and Malia a little privacy. We certainly will. But with Hurricane Bill barreling up their coast, will their Martha's Vineyard vacation be a washout? Ben Logan has the latest.

And sure, Senator Arlen Specter is a stand-up guy, but a stand-up comedian? How he brought the house down at a hometown comedy club next. It's our "Shot," tonight.

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COOPER: The White House pleas for privacy as the first family prepares for a Martha's Vineyard getaway. The Obamas head to the popular vacation spot Sunday for a week of R&R, despite the media frenzy that's sure to follow.

Meantime, another unwelcome guest, Hurricane Bill. Though not expected to make landfall, the storm could dump up to two inches of rain on the vineyard. Luckily, the island has a lot to offer, rain or sunshine.

Dan Lothian takes us up close.

(BEGIN VIDEOTAPE)

DAN LOTHIAN, CNN CORRESPONDENT (voice-over): It's easy to see why Martha's Vineyard is such a big draw. The beaches, the boats, the vintage carousel. But before you attach the label enclave of the rich and famous, longtime summer resident and Harvard professor Charles Ogletree says take a look around.

CHARLES OGLETREE, HARVARD PROFESSOR: Well, it really is one of these rare places where you see people who are unemployed and who are CEOs. You see people who are wealthy and poor, and there is no pretension here. People are very comfortable.

LOTHIAN: Even if sitting presidents keep dropping in. First, it was Ulysses S. Grant, then the Clintons. Now President Obama and his family are preparing to stretch out on this 28 1/2-acre Blue Heron Farm in Chilmark.

NANCY GARDELLA, VINEYARD CHAMBER OF COMMERCE: It's very flattering and impressive that President Obama and his family are coming.

LOTHIAN: Island historians say Mr. Obama's presence carries more weight because of the African-American heritage on Martha's Vineyard. KEITH GORMAN, MARTHA'S VINEYARD MUSEUM: There have been African- Americans on the island since at least the 18th century. In terms of this first family coming to the island, it's important. This shot, I think, is really quite telling.

LOTHIAN: The pictures are in black and white at the local museum. Some were slaves who, when freed, made a home here. Later, other blacks came in search of good jobs.

GORMAN: You could get on a ship, a whaling ship. And in the 19th century you had these multiethnic and multiracial whaling vessels.

LOTHIAN: African-Americans began to settle in Oak Bluffs, an early resort community that didn't shut the door.

OGLETREE: The "colored only," "white only" signs were up throughout much of the 20th century, and so this was a place that didn't have the signs, didn't have the barriers to integration.

LOTHIAN: It's a history largely hidden behind the island's pristine beauty and high-profile presidential visits. But historian Kerry Tankard (ph) is trying to change that. She co-founded the African-American Heritage Trail that marks 22 sites honoring people of color on the island.

UNIDENTIFIED FEMALE: The headstones and things. You know, you can put your hands on it. You can see it. It's a feeling you can't describe. We just want them to know that we were here.

LOTHIAN: While the president may be hoping to simply spend some quiet time relaxing with his family and friends, his visit is also seen as another chapter in this island's deep history.

Dan Lothian, CNN, Martha's Vineyard.

(END VIDEOTAPE)

COOPER: Nice assignment for Dan. I would like that.

Senator Arlen Specter as you've probably never seen him before, as at home in a comedy club as he is on Capitol Hill. First, though, serious stuff. Gary Tuchman joins us with a "360 Bulletin" -- Gary.

TUCHMAN: Anderson, dramatic development in the Michael Jackson investigation. Agents for the Drug Enforcement Administration today raided the Micky Fine pharmacy in Beverly Hills. The pharmacy sued Jackson in 2007, claiming the singer owed more than $100,000 for prescription drugs.

And Jackson's funeral has been postponed until September 3, five days after the pop star's birthday. No reason given for the delay.

The only U.S. Army officer convicted for the infamous My Lai massacre during the Vietnam War has just now apologized publicly, after 41 years. Former Lieutenant William Calley said he feels remorse for the Vietnamese who were killed and for the American soldiers involved.

The ASPCA is speaking out about quarterback Michael Vick's "60 Minutes" interview. In a statement today, the group's CEO says they turned down a request from Vick's public relations team to help restore his image after his dog-fighting sentence. The stated reason, quote, "unique knowledge we had of his indescribable and barbaric acts of animal cruelty."

Michael Vick, Anderson, is playing for the Philadelphia Eagles this year.

COOPER: All right, Gary, thanks.

We've got a special presentation coming up. We're going to be getting beyond the shouting over health-care reform and bring you the facts, not the fear or the myths, the facts you need to make up your mind about whether it's right for the country and for you. That's the top of the hour, an hour-long discussion.

COOPER: Gary, for tonight's "Shot," a little off-color humor from Senator Arlen Specter. In a surprisingly funny turn, the Pennsylvania Democrat brought down the house at a Pittsburgh area comedy club on Thursday night. The event was a benefit for the Children's Music Fund. The comedy, well, let's say it wasn't always family friendly. Here's a sample.

(BEGIN VIDEO CLIP)

SEN. ARLEN SPECTER (D), PENNSYLVANIA: I'm glad to be with you. After being at those town meetings, I'd be delighted to be anywhere.

I just came down for my birthday breakfast, and (UNINTELLIGIBLE) younger. I called up bob dole on his 80th birthday and I said, "Bob, how do you feel?"

He said, "Oh, I feel like a teenager. Problem is, I can't find one."

(END VIDEO CLIP)

COOPER: What was the last line?

TUCHMAN: He said, "I feel like a teenager, but I can't find one." It's a little crude.

COOPER: Ai, yi, yi. Yikes. I'm shocked. I'm scandalized.

TUCHMAN: Last week, Anderson, I covered one of Senator Specter's town-hall hearings. And I'll tell you that it's a fight that he wasn't nearly as funny in front of the audience.

COOPER: No, not as many people laughing there.

Apparently, this is not the senator's first time in the stand-up circuit. I'm told back in 2007 he finished second in a Washington, D.C., stand-up comedy contest. No word on who actually beat him for the top spot. We'll try to figure that out.

Gary, thanks for sitting in for us. Have a great weekend.

Check us out online at AC360.com. You can see all the most recent "Shots" there.

At the top of the hour, no shouting, no jargon, no canned talking points, just a clear, complete look at what health-care reform means to you. The plans on the table, what they cover, what they cost, the facts to answer all the myths and scare tactics. "Extreme Challenges: Health Care" is next.

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COOPER: Hello, and welcome to a different take on a vital subject. Vital because it matters to all of us. Different because we're keeping this to a minimum.

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COOPER: By now you've heard plenty of shouting about health-care reform, but far less about what reform actually is and what it means to you. What changes, what doesn't? The benefits, the costs, and the costs of doing nothing.